While issuing detailed guidelines for digital lending, RBI noted concerns related to misselling, violation of data privacy, unfair business practices, exorbitant interest rates and unethical recovery practices.
RBI tightens digital loan norms
The Reserve Bank of India (RBI) on Wednesday issued strict norms for digital lending. Under this, the central bank said that digital loans should be deposited directly into the bank accounts of borrowers and not through any third party. RBI has framed these strict norms to check the increasing malpractices in the digital lending sector. Other than this RBI It said that the fee payable to LSPs in the credit arbitration process should be paid to the digital lending institutions and not to the borrowers.
expressed concern over high interest
While issuing detailed guidelines for digital lending, RBI mainly mentioned concerns related to unbridled third party affiliations, misselling, data privacy violations, unfair business practices, exorbitant interest rates and unethical recovery practices. RBI had constituted a Working Group on Digital Lending (WGDL), including lending through online platform and mobile application, on 13 January 2021. The central bank further said that the regulatory framework has been strengthened to support the systematic growth of lending through digital lending methods, alleviating regulatory concerns. This regulatory framework is based on the principle that the business of lending should be carried on only by such entities, which are either regulated by the Reserve Bank or which have been permitted to do so under any other law.
Strictness on many other rules also
According to the proposals, strictness has also been made regarding the security of data related to customers. The information collected with the help of digital lending apps requires the approval of the customer and has also been said to be audited. Along with this, the customer’s approval will be necessary to use the information, while further the customer can also get the right to withdraw this approval, the customer can also get his information deleted from the DLA and the lending service provider.